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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-39898

DrivenBrandsLogo_Positive.jpg

Driven Brands Holdings Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
47-3595252
(I.R.S. Employer Identification No.)
440 South Church Street, Suite 700
Charlotte, North Carolina
(Address of principal executive offices)
28202
(Zip Code)
Registrant’s telephone number, including area code: (704) 377-8855

Title of each class
Common Stock, $0.01 par value
Trading Symbol
DRVN
Name of each exchange on which registered
The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Small reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of May 6, 2024, the Registrant had 164,079,785 shares of Common Stock outstanding.



Driven Brands Holdings Inc.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, trends, plans, objectives of management, impact of accounting standards and guidance, impairments, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook, and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; (iv) the risks and costs associated with the integration of, and or ability to integrate, our stores and business units successfully; (v) the proper application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments; and (vi) the competitive environment in which we operate. Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy, and other future conditions, and involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

2


Part I. Financial Information
Item 1. Financial Statements (Unaudited)
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
(in thousands, except per share amounts)March 30, 2024April 1, 2023
Net revenue:
Franchise royalties and fees$45,045 $43,515 
Company-operated store sales374,456 376,066 
Independently-operated store sales53,047 52,532 
Advertising contributions24,070 21,677 
Supply and other revenue75,608 68,677 
Total net revenue572,226 562,467 
Operating Expenses:
Company-operated store expenses242,053 243,409 
Independently-operated store expenses29,355 29,364 
Advertising expenses24,070 21,677 
Supply and other expenses36,216 37,266 
Selling, general, and administrative expenses116,402 112,328 
Acquisition related costs1,794 1,847 
Store opening costs1,263 1,025 
Depreciation and amortization43,229 38,198 
Asset impairment charges and lease terminations19,326 167 
Total operating expenses513,708 485,281 
Operating income 58,518 77,186 
Other expenses, net:
Interest expense, net43,772 38,141 
Loss (gain) on foreign currency transactions4,321 (1,675)
Other expense, net48,093 36,466 
Income before taxes10,425 40,720 
Income tax expense 6,164 10,971 
Net income4,261 29,749 
Net income attributable to non-controlling interest  
Net income attributable to Driven Brands Holdings Inc.$4,261 $29,749 
Earnings per share:
Basic$0.03 $0.18 
Diluted$0.03 $0.17 
Weighted average shares outstanding
Basic159,631 162,784 
Diluted160,604 166,874 





The accompanying notes are an integral part of these unaudited consolidated financial statements.
3



DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months Ended
(in thousands)March 30, 2024April 1, 2023
Net income$4,261 $29,749 
Other comprehensive (loss) income:
Foreign currency translation adjustments(15,907)11,351 
Unrealized loss from cash flow hedges, net of tax expense (benefit) of $15 and ($2), respectively
(617)(200)
Actuarial (loss) gain of defined pension plan, net of tax expense of $0 and $0, respectively
(8)16 
Other comprehensive (loss) income, net(16,532)11,167 
Total comprehensive (loss) income(12,271)40,916 
Comprehensive loss attributable to non-controlling interests (1)
Comprehensive (loss) income attributable to Driven Brands Holdings Inc.$(12,271)$40,917 































The accompanying notes are an integral part of these unaudited consolidated financial statements.
4


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts)
March 30, 2024December 30, 2023
Assets
Current assets:
Cash and cash equivalents$165,513 $176,522 
Restricted cash 657 657 
Accounts and notes receivable, net165,992 151,259 
Inventory82,875 83,171 
Prepaid and other assets49,901 46,714 
Income tax receivable7,337 15,928 
Assets held for sale290,818 301,229 
Advertising fund assets, restricted52,711 45,627 
Total current assets815,804 821,107 
Other assets90,175 56,565 
Property and equipment, net1,425,882 1,438,496 
Operating lease right-of-use assets1,383,400 1,389,316 
Deferred commissions6,643 6,312 
Intangibles, net729,354 739,402 
Goodwill1,435,618 1,455,946 
Deferred tax assets3,453 3,660 
Total assets$5,890,329 $5,910,804 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable$82,843 $67,526 
Accrued expenses and other liabilities246,522 242,171 
Income tax payable2,022 5,404 
Current portion of long-term debt33,020 32,673 
Income tax receivable liability41,437 56,001 
Advertising fund liabilities33,208 23,392 
Total current liabilities439,052 427,167 
Long-term debt2,905,033 2,910,812 
Deferred tax liabilities149,931 154,742 
Operating lease liabilities1,319,936 1,332,519 
Income tax receivable liability108,215 117,915 
Deferred revenue32,159 30,507 
Long-term accrued expenses and other liabilities29,187 30,419 
Total liabilities4,983,513 5,004,081 
Commitments and contingencies (Note 12)
Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding
  
Common stock, $0.01 par value, 900,000,000 shares authorized: and 164,079,581 and 163,965,231 shares outstanding; respectively
1,641 1,640 
Additional paid-in capital1,664,764 1,652,401 
Accumulated deficit(705,826)(710,087)
Accumulated other comprehensive loss(54,407)(37,875)
Total shareholders’ equity attributable to Driven Brands Holdings Inc.906,172 906,079 
Non-controlling interests644 644 
Total shareholders' equity906,816 906,723 
Total liabilities and shareholders' equity$5,890,329 $5,910,804 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)


Three Months Ended
March 30, 2024April 1, 2023
(in thousands, except share amounts)SharesAmountSharesAmount
Preferred stock, $0.01 par value per share
 $  $ 
Common stock, $0.01 par value per share
Balance at beginning of period163,965,231 $1,640 167,404,047 $1,674 
Stock issued relating to Employee Stock Purchase Plan43,764 — 26,358— 
Shares issued for exercise/vesting of equity-based compensation awards170,172 2 130,044 1 
Forfeiture of restricted stock awards(99,586)(1)— — 
Balance at end of period164,079,581 $1,641 167,560,449 $1,675 
Additional paid-in capital
Balance at beginning of period$1,652,401 $1,628,904 
Equity-based compensation expense11,861 2,564 
Exercise of stock options— 1,380 
Stock issued relating to Employee Stock Purchase Plan502 612 
Balance at end of period$1,664,764 $1,633,460 
(Accumulated deficit) retained earnings
Balance at beginning of period$(710,087)$84,795 
Net Income4,261 29,749 
Balance at end of period$(705,826)$114,544 
Accumulated other comprehensive loss
Balance at beginning of period$(37,875)$(62,435)
Other comprehensive (loss) income(16,532)11,168 
Balance at end of period$(54,407)$(51,267)
Non-controlling interests
Balance at beginning of period$644 $631 
Other comprehensive loss— (1)
Balance at end of period$644 $630 
Total shareholders’ equity$906,816 $1,699,042 














The accompanying notes are an integral part of these unaudited consolidated financial statements.
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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended
(in thousands)March 30, 2024April 1, 2023
Net income$4,261 $29,749 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization43,229 38,198 
Equity-based compensation expense11,861 2,564 
Loss on foreign denominated transactions7,574 161 
Gain on foreign currency derivatives(3,253)(1,836)
Loss (gain) on sale and disposal of businesses, fixed assets, and sale-leaseback transactions(12,913)1,671 
Reclassification of interest rate hedge to income(519)(519)
Bad debt expense2,070 82 
Asset impairment charges and lease terminations19,326 167 
Amortization of deferred financing costs and bond discounts1,954 1,850 
Amortization of cloud computing1,345  
(Benefit) provision for deferred income taxes(2,807)4,650 
Other, net10,669 4,043 
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net(17,351)(44,084)
Inventory(1,005)(5,473)
Prepaid and other assets(4,270)(13,867)
Advertising fund assets and liabilities, restricted7,650 906 
Other assets(33,300)(7,382)
Deferred commissions(331)455 
Deferred revenue1,659 161 
Accounts payable14,165 25,597 
Accrued expenses and other liabilities6,293 (960)
Income tax receivable3,976 659 
Cash provided by operating activities60,283 36,792 
Cash flows from investing activities:
Capital expenditures(89,483)(169,155)
Cash used in business acquisitions, net of cash acquired(2,024)(29,307)
Proceeds from sale-leaseback transactions4,550 16,772 
Proceeds from sale or disposal of businesses and fixed assets52,677  
Cash used in investing activities(34,280)(181,690)
Cash flows from financing activities:
Repayment of long-term debt(7,616)(7,002)
Proceeds from revolving lines of credit and short-term debt46,000 140,000 
Repayment of revolving lines of credit and short-term debt(46,000)(25,000)
Repayment of principal portion of finance lease liability(886)(854)
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Payment of Tax Receivable Agreement(24,718) 
Stock option exercises 1,380 
Other, net (32)
Cash (used in) provided by financing activities(33,220)108,492 
Effect of exchange rate changes on cash1,133 2,392 
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted(6,084)(34,014)
Cash and cash equivalents, beginning of period176,522 227,110 
Cash included in advertising fund assets, restricted, beginning of period38,537 32,871 
Restricted cash, beginning of period657 792 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period215,716 260,773 
Cash and cash equivalents, end of period165,513 190,841 
Cash included in advertising fund assets, restricted, end of period43,462 35,126 
Restricted cash, end of period657 792 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period$209,632 $226,759 
Supplemental cash flow disclosures - non-cash items:
Capital expenditures included in accrued expenses and other liabilities$24,060 $39,534 
Deferred consideration included in accrued expenses and other liabilities2,955 $19,069 
Supplemental cash flow disclosures - cash paid for:
Interest$41,784 $37,942 
Income taxes3,721 $5,671 



























The accompanying notes are an integral part of these unaudited consolidated financial statements.
8


DRIVEN BRANDS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Note 1—Description of Business
Description of Business
Driven Brands Holdings Inc. together with its subsidiaries (collectively, the “Company”) is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than 5,000 franchised, independently-operated, and company-operated locations across 49 U.S. states and 13 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, MAACO®, CARSTAR®, Auto Glass Now®, and 1-800-Radiator & A/C® that compete in the automotive services industry.
Tax Receivable Agreement
The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into a Tax Receivable Agreement which provides our pre-IPO shareholders with the right to receive payment of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local, and provincial income tax that the Company will actually realize. The Tax Receivable Agreement was effective as of the date of the Company’s IPO. The Company recorded a current tax receivable liability of $41 million and $56 million as of March 30, 2024 and December 30, 2023, respectively, and a non-current tax receivable liability of $108 million and $118 million as of March 30, 2024 and December 30, 2023, respectively, on the consolidated balance sheets. We made an initial payment of approximately $25 million under the Tax Receivable Agreement in January 2024.
Note 2— Summary of Significant Accounting Policies
Fiscal Year
The Company operates and reports financial information on a 52- or 53-week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The three months ended March 30, 2024 and April 1, 2023 each consisted of 13 weeks, respectively. The Car Wash segment is consolidated based on a calendar month end.
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited interim financial data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of operations, balance sheet, cash flows, and shareholders’/members’ equity for the interim periods presented. The adjustments include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 30, 2023. Certain information and note disclosures normally included in the unaudited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three months ended March 30, 2024 may not be indicative of the results to be expected for any other interim period or the year ending December 28, 2024.
The three months ended March 30, 2024 includes an adjustment to the unaudited consolidated balance sheet and consolidated statement of operations that originated in the prior year. The adjustment decreased both current assets and selling, general, and administrative expenses by $3.7 million. The Company evaluated the materiality of the adjustment on prior period financial statements, recorded the adjustment in the current period, and concluded the effect of the adjustment was immaterial to both the current and prior financial statements.
Use of Estimates    
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the related notes to the consolidated financial
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statements. Significant items that are subject to estimates and assumptions include, but are not limited to, valuation of intangible assets and goodwill; income taxes; allowances for credit losses; valuation of derivatives; self-insurance claims; and equity-based compensation. Management evaluates its estimates on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on historical experience, current conditions, and various other additional information, may affect amounts reported in future periods. Actual results could differ due to uncertainty inherent in the nature of these estimates.
Fair Value of Financial Instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or
Level 3: Unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Financial assets and liabilities measured at fair value on a recurring basis as of March 30, 2024 and December 30, 2023 are summarized as follows:
Items Measured at Fair Value at March 30, 2024
(in thousands)Level 1Level 2Total
Derivative assets, recorded in other assets 2,077 2,077 
Derivative liabilities, recorded in accrued expenses and other liabilities 174 174 
Items Measured at Fair Value at December 30, 2023
(in thousands)Level 1Level 2Total
Derivative assets, recorded in other assets 285 285 
Derivative liabilities, recorded in accrued expenses and other liabilities 493 493 
The carrying value and estimated fair value of total long-term debt were as follows:
March 30, 2024December 30, 2023
(in thousands)Carrying valueEstimated fair valueCarrying valueEstimated fair value
Long-term debt$2,970,070 $2,824,358 $2,977,996 $2,800,011 
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. The standard enhances segment disclosure requirements of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) to assist in understanding how segment expenses and operating results are evaluated. The new standard does not change the definition or aggregation of operating segments. The standard also expands the interim disclosure requirements on a retrospective basis. This ASU is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU improves the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the tax rate
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reconciliation as well as disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
Note 3—Acquisitions and Divestitures
The Company strategically acquires companies and assets to increase its footprint and offer products and services that diversify its existing offerings, primarily through asset purchase agreements. These acquisitions are accounted for as business combinations using the acquisition method, whereby the purchase price is allocated to the assets acquired and liabilities assumed, based on their fair values as of the date of the acquisition with the remaining amount recorded in goodwill.

2024 Acquisitions

The Company completed one acquisition within the Maintenance segment and one acquisition in the international car wash business within the Car Wash segment representing two sites and one site, respectively, for an aggregate total cash consideration, net of cash acquired of less than $2 million.

2023 Acquisitions
The Company completed two acquisitions within the Maintenance segment during the three months ended April 1, 2023, representing two sites. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $2 million.
The Company completed one acquisition within the Car Wash segment during the three months ended April 1, 2023, representing one site. The aggregate cash consideration for this acquisition, net of cash acquired and liabilities assumed, was approximately $11 million.
The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The provisional amounts for assets acquired and liabilities assumed for the 2023 acquisitions are as follows:
2023 Maintenance Segment
(in thousands)Maintenance
Assets:
Operating lease right-of-use assets$658 
Property and equipment, net1,655 
Assets acquired2,313 
Liabilities:
Accrued expenses and other liabilities17 
Operating lease liabilities641 
Total liabilities assumed658 
Cash consideration, net of cash acquired2,255 
Deferred consideration95 
Total consideration, net of cash acquired$2,350 
Goodwill$695 
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2023 Car Wash Segment
(in thousands)Car Wash
Assets:
Property and equipment, net$8,270 
Assets acquired8,270 
Cash consideration, net of cash acquired10,994 
Total consideration, net of cash acquired$10,994 
Goodwill$2,724 
Goodwill represents the excess of the consideration paid over the fair value of net assets acquired and includes the expected benefit of synergies within the existing segments and intangible assets that do not qualify for separate recognition. Goodwill, which was allocated to the Maintenance and Car Wash segments, is substantially all deductible for income tax purposes.
Deferred Consideration and Transaction Costs
Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions under the purchase agreement have been satisfied. The Company had $3 million and $19 million of deferred consideration related to acquisitions as of March 30, 2024 and April 1, 2023, respectively. The Company paid less than $1 million and $16 million of deferred consideration related to prior acquisitions during the three months ended March 30, 2024 and April 1, 2023, respectively. Deferred consideration is recorded within investing activities at the time of payment.
The Company incurred less than $1 million of transaction costs during each of the three months ended March 30, 2024 and April 1, 2023.
Divestitures
During the three months ended March 30, 2024, the Company sold nine company-operated stores within the Paint, Collision, & Glass segment to a franchisee at a purchase price of $18 million. The Company sold certain store assets as well as allocated $9 million of Paint, Collision & Glass goodwill based on the fair value of the segment at the time of sale, resulting in a gain of $6 million on the sale of businesses within selling, general, and administrative expenses on the unaudited consolidated statement of operations during the three months ended March 30, 2024.
Note 4— Revenue from Contracts with Customers
The Company records contract assets for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year and if such costs are material. Commission expenses, a primary cost associated with the sale of franchise licenses, are amortized to selling, general, and administrative expenses in the unaudited consolidated statements of operations ratably over the life of the associated franchise agreement.
Capitalized costs to obtain a contract as of March 30, 2024 and December 30, 2023 were $7 million and $6 million, respectively, and are presented within deferred commissions on the consolidated balance sheets. The Company recognized less than $1 million of costs during the three months ended March 30, 2024 and April 1, 2023, respectively, that were recorded as a contract asset at the beginning of the periods.
Contract liabilities consist primarily of deferred franchise fees and deferred development fees. The Company had contract liabilities of $32 million and $31 million as of March 30, 2024 and December 30, 2023, respectively, which are presented within deferred revenue on the consolidated balance sheets. The Company recognized $1 million of revenue relating to contract liabilities during each of the three months ended March 30, 2024 and April 1, 2023.
Note 5—Segment Information
The Company’s worldwide operations are comprised of the following reportable segments: Maintenance, Car Wash, Paint, Collision & Glass, and Platform Services.
In addition to the reportable segments, the Company’s consolidated financial results include “Corporate and Other” activity. Corporate and Other incurs costs related to the advertising revenues and expenses and shared service costs, which are related to finance, IT, human resources, legal, supply chain, and other support services. Corporate and Other activity includes the adjustments necessary to eliminate certain intercompany transactions, namely sales by the Platform Services segment to the Paint, Collision & Glass and Maintenance segments.
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Segment results for the three months ended March 30, 2024 and April 1, 2023 are as follows:
Three months ended March 30, 2024
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass
Platform ServicesCorporate
and Other
Total
Franchise royalties and fees$14,454 $ $24,632 $5,959 $ $45,045 
Company-operated store sales220,871 90,227 62,509 849  374,456 
Independently-operated store sales 53,047    53,047 
Advertising fund contributions    24,070 24,070 
Supply and other revenue26,388 1,448 19,247 47,018 (18,493)75,608 
Total net revenue$261,713 $144,722 $106,388 $53,826 $5,577 $572,226 
Segment Adjusted EBITDA$91,436 $29,134 $30,820 $19,871 $(38,980)$132,281 
Three months ended April 1, 2023
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass
Platform
Services
Corporate
and Other
Total
Franchise royalties and fees$12,443 $ $24,298 $6,774 $ $43,515 
Company-operated store sales195,260 102,446 77,479 881  376,066 
Independently-operated store sales 52,532    52,532 
Advertising fund contributions    21,677 21,677 
Supply and other revenue19,965 2,002 19,026 44,378 (16,694)68,677 
Total net revenue$227,668 $156,980 $120,803 $52,033 $4,983 $562,467 
Segment Adjusted EBITDA$72,233 $41,048 $35,450 $17,008 $(41,251)$124,488 

The reconciliations of Income before taxes to Segment Adjusted EBITDA for the three months ended March 30, 2024 and April 1, 2023 are as follows:
Three Months Ended
(in thousands)March 30, 2024April 1, 2023
Income before taxes$10,425 $40,720 
Depreciation and amortization43,229 38,198 
Interest expense, net43,772 38,141 
Acquisition related costs(a)
1,794 1,847 
Non-core items and project costs, net(b)
4,711 1,824 
Store opening costs1,263 1,025 
Cloud computing amortization(c)
1,345  
Equity-based compensation expense(d)
11,861 2,564 
Foreign currency transaction (gain) loss, net(e)
4,321 (1,675)
Asset sale leaseback (gain) loss, impairment and closed store expenses(f)
9,560 1,844 
Segment Adjusted EBITDA$132,281 $124,488 
(a)     Consists of acquisition costs as reflected within the unaudited consolidated statements of operations, including legal, consulting and other fees, and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in
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connection with other acquisitions in the future and, under GAAP, such costs relating to acquisitions are expensed as incurred.
(b)     Consists of discrete items and project costs, including third party consulting and professional fees associated with strategic transformation initiatives as well as non-recurring payroll-related costs.
(c) Includes non-cash amortization expenses relating cloud computing arrangements.
(d)     Represents non-cash equity-based compensation expense.
(e)    Represents foreign currency transaction (gains) losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts.
(f)     Relates to (gains) losses, net on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, assets held for sale, and lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates. Refer to Note 6 for additional information.
Note 6—Assets Held For Sale
During 2023, management performed an initial strategic review of the U.S. car wash operations, which included, but was not limited to, an evaluation of the following: store performance, the competitive landscape, revenue and expense optimization opportunities, and capital requirements. As a result of this strategic review, management approved the closure of 29 stores, halted the opening of new company-operated stores, and began marketing property and equipment for sale that will not be utilized by the Company. These actions resulted in the transfer of assets from property and equipment to assets held for sale during the third quarter of 2023.
The changes in assets held for sale were as follows:
(in thousands)
Balance at December 30, 2023
$301,229 
Additions38,892 
Impairments(18,347)
Sales and disposals(30,956)
Balance at March 30, 2024
$290,818 
During the three months ending March 30, 2024, management continued to enhance properties included within held for sale resulting in additions of $39 million. Management evaluated the fair value for all assets included within held for sale, which resulted in an impairment of $18 million for the three months ended March 30, 2024. In addition, during the three months ended March 30, 2024, the Company sold 13 locations resulting in a net gain of $6 million. The Company will continue to evaluate the fair value of assets held for sale, which may result in additional impairments based on unfavorable market or other economical factors in the future.
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Note 7 — Long-Term Debt
The Company’s long-term debt obligations consist of the following:
(in thousands)March 30, 2024December 30, 2023
Series 2018-1 Securitization Senior Notes, Class A-2$258,500 $259,188 
Series 2019-1 Securitization Senior Notes, Class A-2284,250 285,000 
Series 2019-2 Securitization Senior Notes, Class A-2262,625 263,313 
Series 2020-1 Securitization Senior Notes, Class A-2168,438 168,875 
Series 2020-2 Securitization Senior Notes, Class A-2435,375 436,500 
Series 2021-1 Securitization Senior Notes, Class A-2438,750 439,875 
Series 2022-1 Securitization Senior Notes, Class A-2359,525 360,438 
Term Loan Facility490,000 491,250 
Revolving Credit Facility248,000 248,000 
Other debt (a)
24,607 25,557 
Total debt2,970,070 2,977,996 
Less: unamortized debt issuance costs(32,017)(34,511)
Less: current portion of long-term debt(33,020)(32,673)
Total long-term debt, net$2,905,033 $2,910,812 
(a) Consists primarily of finance lease obligations.
Series 2019-3 Variable Funding Securitization Senior Notes
In December 2019, Driven Brands Funding, LLC (the “Issuer”) issued Series 2019-3 Variable Funding Senior Notes, Class A-1 (the “2019 VFN”) in the revolving amount of $115 million. The 2019 VFN have a final legal maturity date in January 2050. The commitment under the 2019 VFN was set to expire in July 2022, with the option of three one-year extensions. In July 2023, the Company exercised the second of three one-year extension options. The 2019 VFN are secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. As of July 1, 2023, borrowings incur interest at the Base Rate plus an applicable margin or Secured Overnight Financing Rate (“SOFR”) plus an applicable term adjustment. No amounts were outstanding under the 2019 VFN as of March 30, 2024 and no borrowings or repayments were made during the three months ended March 30, 2024. As of March 30, 2024, there were $25 million of outstanding letters of credit which reduced the borrowing availability under the 2019 VFN.
Driven Holdings Revolving Credit Facility
In May 2021, Driven Holdings, LLC, (the “Borrower”) a Delaware limited liability company and indirect wholly-owned subsidiary of Driven Brands Holdings Inc., entered into a credit agreement to secure a revolving line of credit with a group of financial institutions (the “Revolving Credit Facility”), which provides for an aggregate amount of up to $300 million, and has a maturity date in May 2026 (the “Credit Agreement”). On June 2, 2023, the Credit Agreement was amended pursuant to which as of July 1, 2023, borrowings will incur interest at the Base Rate plus an applicable margin or SOFR plus an applicable term adjustment. The Revolving Credit Facility also includes periodic commitment fees based on the available unused balance and a quarterly administrative fee.
There was $248 million outstanding on the Revolving Credit Facility as of March 30, 2024 with $46 million of borrowings and $46 million of repayments made during the three months ended March 30, 2024.
The Company’s debt agreements are subject to certain quantitative and qualitative covenants. As of March 30, 2024, the Company and its subsidiaries were in material compliance with such covenants.
Note 8 — Leases
During the three months ended March 30, 2024, the Company sold three maintenance properties in various locations throughout the U. S. for a total of $4 million. During the three months ended April 1, 2023, the Company sold one maintenance and five car wash properties in various locations throughout the U.S. for a total of $17 million. Concurrently with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements each have an initial term of 20 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of $3 million and $3 million, respectively, as of March 30, 2024, and $10 million
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and $10 million, respectively, as of April 1, 2023 related to these lease arrangements. The company recorded gains of less than $1 million and $3 million for the three months ended March 30, 2024 and April 1, 2023, respectively.
Supplemental cash flow information related to the Company’s lease arrangements for the three months ended March 30, 2024 and April 1, 2023, respectively, was as follows:
Three Months Ended
(in thousands)March 30, 2024April 1, 2023
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows used in operating leases$42,362 $29,558 
     Operating cash flows used in finance leases51 475 
     Financing cash flows used in finance leases98 529 
Note 9 — Equity-based Compensation
The Company granted new awards during the three months ended March 30, 2024, consisting of 932,323 restricted stock units (“RSUs”) and 1,056,570 performance stock units (“PSUs”).
Awards are eligible to vest provided that the employee remains in continuous service on each vesting date. The RSUs vest ratably each year on the anniversary date generally over a two or three year period. The PSUs vest after a three-year performance period. The number of PSUs that vest is contingent on the Company achieving certain performance goals, one being a performance condition and the other being a market condition. The number of PSU shares that vest may range from 0% to 200% of the original grant, based upon the level of performance. Certain awards are considered probable of meeting vesting requirements, and therefore, the Company has started recognizing expense. For both RSUs and PSUs, if the grantee’s continuous service terminates for any reason, the grantee shall forfeit all right, title, and interest in any unvested units as of the termination date.
The fair value of the total RSUs, performance-based PSUs, and market-based PSUs granted during the three months ended March 30, 2024 were $12.9 million, $8.6 million, and $8.1 million, respectively. The Company based the fair value of the RSUs and performance-based PSUs on the Company’s stock price on the grant date.
The range of assumptions used for issued PSUs with a market condition valued using the Monte Carlo model were as follows:
Three Months Ended
March 30, 2024April 1, 2023
Annual dividend yield%%
Expected term (years)2.82.8
Risk-free interest rate4.5%4.51%
Expected volatility49.2%38.8%
Correlation to the index peer group 49.2%60.2%
The Company recorded $12 million and $3 million of equity-based compensation expense during the three months ended March 30, 2024 and April 1, 2023, respectively, within selling, general, and administrative expenses on the unaudited consolidated statements of operations.
16


Note 10—Earnings Per Share
The Company calculates basic and diluted earnings per share using the two-class method. The following table sets forth the computation of basic and diluted earnings per share attributable to common shareholders:
Three Months Ended
(in thousands, except per share amounts)
March 30, 2024April 1, 2023
Basic earnings per share:
Net income attributable to Driven Brands Holdings Inc.$4,261 29,749 
Less: Net income attributable to participating securities, basic90 626 
Net income after participating securities, basic4,171 29,123 
Weighted-average common shares outstanding159,631 162,784 
Basic earnings per share$0.03 $0.18 

Three Months Ended
(in thousands, except per share amounts)
March 30, 2024April 1, 2023
Diluted earnings per share:
Net income attributable to Driven Brands Holdings Inc.$4,261 $29,749 
Less: Net income attributable to participating securities, diluted 17 559 
Net income after participating securities, diluted$4,244 $29,190 
Weighted-average common shares outstanding159,631 162,784 
Dilutive effect of share-based awards973 4,090 
Weighted-average common shares outstanding, as adjusted160,604 166,874 
Diluted earnings per share$0.03 $0.17 
Basic earnings per share is computed by dividing the net income attributable to Driven Brands Holdings Inc. by the weighted-average number of common shares outstanding for the period. In addition, the Company’s participating securities are related to certain restricted stock awards issued to Section 16 officers which include non-forfeitable dividend rights.
The Company has 2,067,468 and 5,351,252 shares of performance awards that are contingent on performance conditions which have not yet been met and therefore have been excluded from the computation of weighted average shares for the three months ended March 30, 2024 and April 1, 2023, respectively.
The following securities were not included in the computation of diluted shares outstanding because the effect would be antidilutive:
Three Months Ended
Number of securities (in thousands)
March 30, 2024April 1, 2023
Restricted stock units458 41 
Stock Options1,740 2,003 
Total2,198 2,044 
Note 11—Income Taxes
The Company’s tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date ordinary income before taxes. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur.
Income tax expense was $6 million for the three months ended March 30, 2024 compared to $11 million for the three months ended April 1, 2023. The effective income tax rate for the three months ended March 30, 2024 was 59.1% compared to 26.9% for the three months ended April 1, 2023. The effective tax rate for the three months ended March 30, 2024 was primarily driven by the asset impairment charges and the non-deductible equity-based compensation expense. The effective tax rate for three months ended April 1, 2023 was driven by the inclusion of foreign disregarded entity losses.
17


Note 12—Commitments and Contingencies
We are subject to various lawsuits, administrative proceedings, audits, and claims. Some of these lawsuits purport to be class actions and/or seek substantial damages. We are required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Management regularly assesses our insurance deductibles, analyzes litigation information with our attorneys, and evaluates our loss experience in connection with pending legal proceedings. We record our best estimate of a loss when the loss is considered probable and the amount of such loss can be reasonably estimated. When a loss is probable and there is a range of estimated loss with no best estimate within the range, we record the minimum estimated liability related to the lawsuit or claim. As additional information becomes available, we reassess the potential liability and revise our accruals, if necessary. Legal fees and expenses associated with the defense of all of our litigation are expensed as such fees and expenses are incurred. Because of uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ materially from our estimates.
Genesee County Employees’ Retirement System v. Driven Brands Holdings Inc., et al. – On December 22, 2023, Genesee County Employees’ Retirement System filed a putative class action lawsuit in the U.S. District Court for the Western District of North Carolina (the “Court”) against the Company as well as a current and a former Company executive (the “Individual Defendants”) alleging violations of Section 10(b) and Rule 10b-5 of the Exchange Act by the Company, as well as violations of Section 20(a) of the Exchange Act by the Individual Defendants. Genesee County Employees’ Retirement System, Oakland County Employees’ Retirement System, and Oakland County Voluntary Employees’ Beneficiary Association (collectively the “Michigan Funds”) have moved for appointment as lead plaintiffs and for Bernstein Litowitz Berger & Grossmann LLP to be appointed as lead counsel for the purported class. The Michigan Funds purport to represent a class of stockholders who purchased Company shares between October 27, 2021 and August 1, 2023. On March 5, 2024, the Michigan Funds filed a notice of unopposed motion asking the Court to grant their prior motion to appoint them as lead plaintiffs. The Court has yet to rule on the unopposed motion. The Company disputes the allegations of wrongdoing and intends to vigorously defend against the action. No assessment as to the likelihood or range of any potential adverse outcome has been made as of the date of this filing.
Other than the matter described above, as of March 30, 2024, there are no current proceedings or litigation matters involving the Company or its property that we believe would have a material adverse effect on our consolidated financial position or cash flows, although they could have a material adverse effect on our operating results for a particular reporting period.
18


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands,” “the Company,” “we,” “us,” or “our”) should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included elsewhere in this quarterly report. We operate on a 52 or 53-week fiscal year, which ends on the last Saturday in December. The three months ended March 30, 2024 and April 1, 2023 were both 13 week periods.
Overview
Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than 5,000 locations across 49 U.S. states and 13 other countries. Our scaled, diversified platform fulfills an extensive range of core retail and commercial automotive needs, including paint, collision, glass, and repair services, as well as a variety of high-frequency services, such as oil changes and car washes. We have continued to grow our base of consistent recurring revenue by adding new franchised and company-operated stores and same store sales growth. Driven Brands generated net revenue of approximately $572 million during the three months ended March 30, 2024, an increase of 2% compared to the prior year, and system-wide sales of approximately $1.6 billion during the three months ended March 30, 2024, an increase of 7% from the prior year.
Q1 2024 Highlights and Key Performance Indicators
(as compared to same period in the prior year, unless otherwise noted)
Net revenue increased 2% to $572 million, driven by same store sales and net store growth.
Consolidated same store sales increased 0.7%.
The Company added 20 net new stores in the quarter.
Net Income decreased 86% to $4 million or $0.03 per diluted share in the current year, primarily relating to impairment charges, increased equity-based compensation expense, depreciation and amortization and interest expenses as well as an unfavorable impact from foreign exchange, partially offset by gains primarily from the sale of a business, assets held for sale, and favorable lease terminations.
Adjusted Net Income (non-GAAP) decreased 3% to $38 million or $0.23 per diluted share. The decrease was primarily due to decreased Segment Adjusted EBITDA within our Car Wash and Paint, Collision & Glass segments as well as increased interest and depreciation expense, partially offset by increased Segment Adjusted EBITDA within our Maintenance and Platform Services segments.
Adjusted EBITDA (non-GAAP) increased 6% to $131 million. The increase was primarily due to increased Segment Adjusted EBITDA within our Maintenance and Platform Services segments, partially offset by decreased Segment Adjusted EBITDA within our Car Wash and Paint, Collision & Glass segments.

19


Key Performance Indicators
Key measures that we use in assessing our business and evaluating our segments include the following:
System-wide sales. System-wide sales represent the total of net sales for our franchised, independently-operated, and company-operated stores. This measure allows management to better assess the total size and health of each segment, our overall store performance, and the strength of our market position relative to competitors. Sales at franchised stores are not included as revenue in our results from operations, but rather, we include franchise royalties and fees that are derived from sales at franchised stores.
Store count. Store count reflects the number of franchised, independently-operated, and company-operated stores open at the end of the reporting period. Management reviews the number of new, closed, acquired, and divested stores to assess net unit growth and drivers of trends in system-wide sales, franchise royalties and fees revenue, company-operated store sales, and independently-operated store sales.
Same store sales. Same store sales reflect the change in sales year-over-year for the same store base. We define the same store base to include all franchised, independently-operated, and company-operated stores open for comparable weeks during the given fiscal period in both the current and prior year, which may be different from how others define similar terms. This measure highlights the performance of existing stores, while excluding the impact of new store openings and closures and acquisitions and divestitures.
Segment Adjusted EBITDA. We define Segment Adjusted EBITDA as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, store opening costs, cloud computing amortization, and certain non-recurring and non-core, infrequent or unusual charges. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Segment Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 5 in our consolidated financial statements for a reconciliation of income before taxes to Segment Adjusted EBITDA for the three months ended March 30, 2024 and April 1, 2023.

20


The following table sets forth our key performance indicators for the three months ended March 30, 2024 and April 1, 2023:
Three Months Ended
(in thousands, except store count or as otherwise noted)March 30, 2024April 1, 2023
System-Wide Sales
System-Wide Sales by Segment:
Maintenance$499,732 $441,943 
Car Wash143,274 154,978 
Paint, Collision & Glass882,124 816,042 
Platform Services78,001 89,984 
     Total$1,603,131 $1,502,947 
System-Wide Sales by Business Model:
Franchised Stores$1,175,628 $1,074,349 
Company-Operated Stores374,456 376,066 
Independently-Operated Stores53,047 52,532 
     Total $1,603,131 $1,502,947 
Store Count
Store Count by Segment:
Maintenance1,814 1,666 
Car Wash1,106 1,116 
Paint, Collision & Glass1,883 1,877 
Platform Services205 205 
     Total5,008 4,864 
Store Count by Business Model:
Franchised Stores3,007 2,913 
Company-Operated Stores1,283 1,235 
Independently-Operated Stores718 716 
     Total5,008 4,864 
Same Store Sales %
Maintenance4.8 %12.6 %
Car Wash(7.4 %)(11.3%)
Paint, Collision & Glass1.3 %14.1 %
 Total consolidated0.7 %9.0 %
Segment Adjusted EBITDA
Maintenance$91,436 $72,233 
Car Wash29,134 41,048 
Paint, Collision & Glass30,820 35,450 
Platform Services19,871 17,008 
Adjusted EBITDA as a percentage of net revenue by segment
Maintenance34.9 %31.7 %
Car Wash20.1 %26.1 %
Paint, Collision & Glass29.0 %29.3 %
Platform Services36.9 %32.7 %
Total consolidated22.9 %22.0 %

21


Reconciliation of Non-GAAP Financial Information
To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures throughout this quarterly report, as described further below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making.
Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with GAAP.
Adjusted Net Income/Adjusted Earnings per Share. We define Adjusted Net Income as net income calculated in accordance with GAAP, adjusted for acquisition-related costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges, amortization related to acquired intangible assets and the tax effect of the adjustments. Adjusted Earnings Per Share is calculated by dividing Adjusted Net Income by the weighted average shares outstanding. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.

22


The following table provides a reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings per Share:
Adjusted Net Income /Adjusted Earnings per Share
Three Months Ended
(in thousands, except per share data)March 30, 2024April 1, 2023
Net income $4,261 $29,749 
Acquisition related costs(a)
1,794 1,847 
Non-core items and project costs, net(b)
4,711 1,824 
Cloud computing amortization(c)
1,345 — 
Equity-based compensation expense(d)
11,861 2,564 
Foreign currency transaction loss (gain), net(e)
4,321 (1,675)
Asset sale leaseback (gain) loss, impairment and closed store expenses(f)
9,560 1,844 
Amortization related to acquired intangible assets(g)
7,020 6,036 
Valuation allowance for deferred tax asset(h)
1,134 — 
Adjusted net income before tax impact of adjustments46,007 42,189 
Tax impact of adjustments(i)
(7,885)(3,085)
Adjusted net income38,122 39,104 
Net income attributable to non-controlling interest— — 
Adjusted net income attributable to Driven Brands Holdings Inc.$38,122 $39,104 
Earnings per share
Basic$0.03 $0.18 
Diluted$0.03 $0.17 
Adjusted earnings per share
Basic$0.23 $0.24 
Diluted$0.23 $0.23 
Weighted average shares outstanding for Net Income
Basic159,631 162,784 
Diluted160,604 166,874 
Adjusted EBITDA. We define Adjusted EBITDA as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.

23


The following table provides a reconciliation of Net Income to Adjusted EBITDA:
Adjusted EBITDA
Three Months Ended
March 30, 2024April 1, 2023
Net income $4,261 $29,749 
Income tax expense 6,164 10,971 
Interest expense, net43,772 38,141 
Depreciation and amortization43,229 38,198 
EBITDA97,426 117,059 
Acquisition related costs(a)
1,794 1,847 
Non-core items and project costs, net(b)
4,711 1,824 
Cloud computing amortization(c)
1,345 — 
Equity-based compensation expense(d)
11,861 2,564 
Foreign currency transaction loss (gain), net(e)
4,321 (1,675)
Asset sale leaseback (gain) loss, impairment and closed store expenses(f)
9,560 1,844 
Adjusted EBITDA$131,018 $123,463 
(a) Consists of acquisition costs as reflected within the unaudited consolidated statements of operations, including legal, consulting and other fees, and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
(b)     Consists of discrete items and project costs, including third party consulting and professional fees associated with strategic transformation initiatives as well as non-recurring payroll-related costs.
(c) Includes non-cash amortization expenses relating to cloud computing arrangements.
(d)     Represents non-cash equity-based compensation expense.
(e)    Represents foreign currency transaction (gains) losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts.
(f)     Relates to (gains) losses, net on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, assets held for sale, and lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates.
(g)    Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the unaudited consolidated statement of operations.
(h)    Represents valuation allowances on income tax carryforwards in certain domestic jurisdictions that are not more likely than not to be realized.
(i)     Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred tax assets. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 36% depending upon the tax attributes of each adjustment and the applicable jurisdiction.


24


Results of Operations for the Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023
Net Income
We recognized net income of $4 million, or $0.03 per diluted share, for the three months ended March 30, 2024, compared to $30 million, or $0.17 per diluted share, for the three months ended April 1, 2023. The decrease of approximately $25 million was primarily due to the following:
non-cash impairment charges of $19 million, primarily relating to assets held for sale in the current period;
increased interest expense of $6 million, primarily due to increased borrowings and higher variable rates on the Revolving Credit Facility;
unfavorable impact from foreign exchange of $6 million;
increased depreciation and amortization expenses of $5 million relating to capital expenditures and new store openings that occurred in the prior 12 months; and
decreased operating margins within the Car Wash and Paint, Collision & Glass segments.
These decreases were partially offset by:
a gain primarily relating to the sale of a business, assets held for sale, and favorable lease terminations of approximately $13 million during the three months ended March 30, 2024 compared to a loss of $2 million during the three months ended April 1, 2023;
a decrease in tax expense of $5 million; and
positive same store sales, primarily within the Maintenance segment, and organic store count that occurred in the prior 12 months.
Adjusted Net Income
Adjusted net income was $38 million for the three months ended March 30, 2024, a decrease of $1 million, compared to $39 million for the three months ended April 1, 2023. This decrease was primarily due to the following:
increased interest expense of $6 million, primarily due to increased borrowings and higher variable rates on the Revolving Credit Facility;
increased depreciation expenses of $5 million relating to capital expenditures and new store openings that occurred in the prior 12 months; and
decreased operating margins within the Car Wash and Paint, Collision & Glass segments.
The decreases were partially offset by:
positive same store sales, primarily within the Maintenance segment, and organic store count that occurred in the prior 12 months.
Adjusted EBITDA
Adjusted EBITDA was $131 million for the three months ended March 30, 2024, an increase of $8 million, compared to $123 million for the three months ended April 1, 2023. The increase in Adjusted EBITDA was primarily due to:
positive same store sales, primarily within the Maintenance segment, and organic store count that occurred in the prior 12 months.
The increases were partially offset by:
decreased operating margins within the Car Wash and Paint, Collision & Glass segments.
25


To facilitate the review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the consolidated statements of operations. Certain percentages presented have been rounded to the nearest number, therefore, totals may not equal the sum of the line items in the tables below.
Net Revenue
Three Months Ended
(in thousands)
March 30, 2024% of Net RevenuesApril 1, 2023% of Net Revenues
Franchise royalties and fees$45,045 7.9 %$43,515 7.7 %
Company-operated store sales374,456 65.4 %376,066 66.9 %
Independently-operated store sales53,047 9.3 %52,532 9.3 %
Advertising fund contributions24,070 4.2 %21,677 3.9 %
Supply and other revenue75,608 13.2 %68,677 12.2 %
    Total net revenue$572,226 100.0 %$562,467 100.0 %
Franchise Royalties and Fees
Franchise royalties and fees increased $2 million, or 4%, primarily due to same store sales growth and a net increase of 94 franchised stores. Franchised system-wide sales increased $101 million, or 9%.
Company-Operated Store Sales
Company-operated store sales decreased $2 million, or less than 1%, of which approximately $15 million and $12 million related to a decrease in the Paint, Collision & Glass and Car Wash segments, respectively, partially offset by an increase of $26 million in the Maintenance segment. The sales decrease in the Paint, Collision & Glass segment was primarily driven by revenue associated with the sale of nine company-operated stores to a franchisee in the current period as well as decreased volume within the U.S. glass business. The sales decrease in the Car Wash segment primarily related to reduced volume resulting in decreased same store sales. The sales increase in the Maintenance segment was primarily due to same store sales growth and 62 net new company-operated stores. In aggregate, the Company added a net 48 company-operated stores year-over-year.
Independently-Operated Store Sales
Independently-operated store sales (comprised entirely of sales from the international car wash locations) increased $1 million, or 1%, primarily due to an increase in same store sales, partially offset by a negative impact from foreign exchange.
Advertising Fund Contributions
Advertising fund contributions increased by $2 million, or 11%, primarily due to an increase in franchise system-wide sales of approximately $101 million, or 9%, from same store sales growth and an additional 94 net new franchise stores. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of the franchisee’s gross sales.
Supply and Other Revenue
Supply and other revenue increased $7 million, or 10%, primarily due to growth in product and service revenue within the Maintenance and Platform Services segments as a result of an increase in system-wide sales.
26


Operating Expenses
Three Months Ended
(in thousands)
March 30, 2024% of Net RevenuesApril 1, 2023% of Net Revenues
Company-operated store expenses$242,053 42.3 %$243,409 43.3 %
Independently-operated store expenses29,355 5.1 %29,364 5.2 %
Advertising fund expenses24,070 4.2 %21,677 3.9 %
Supply and other expenses36,216 6.3 %37,266 6.6 %
Selling, general, and administrative expenses
116,402 20.3 %112,328 20.0 %
Acquisition related costs1,794 0.3 %1,847 0.3 %
Store opening costs1,263 0.2 %1,025 0.2 %
Depreciation and amortization43,229 7.6 %38,198 6.8 %
Asset impairment charges and lease terminations19,326 3.4 %167 — %
    Total operating expenses$513,708 89.8 %$485,281 86.3 %
Company-Operated Store Expenses
Company-operated store expenses decreased $1 million, or 1%, primarily due to the decreased company-operated store sales, partially offset by increased rent expense at properties converted to leases through sale leasebacks that occured during the prior 12 months.
Independently-Operated Store Expenses
Independently-operated store expenses (comprised entirely of expenses from the international car wash locations) remained flat period over period as a result of cost management.
Advertising Fund Expenses
Advertising fund expenses increased $2 million, or 11%, which is commensurate with the increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.
Supply and Other Expenses
Supply and other expenses decreased $1 million, or 3%, due to decreased product costs associated with supply and other revenue.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased $4 million, or 4%, primarily due to increased equity-based compensation expense resulting from modifications of certain stock awards in the fourth quarter of 2023 as well as increased third party and marketing expenditures. These expenses were partially offset by a gain primarily relating to the sale of a business, assets held for sale, and favorable lease terminations of approximately $13 million during the three months ended March 30, 2024 compared to a loss of $2 million during the three months ended April 1, 2023. During the three months ended March 30, 2024 the company recorded a gain of $6 million from the sale of nine company-operated stores to a franchisee, a gain of $6 million for assets held for sale, and favorable lease terminations of $6 million on previously impaired ROU assets, offset by $5 million of loss from disposals in the current period.
Acquisition Related Costs
Acquisition related costs decreased less than $1 million due to decreased acquisition activity in the current year compared to the prior year.
Store Opening Costs
Store opening costs remained flat primarily as the Company continues to open company-operated stores, primarily associated with Take 5 Oil new store openings and brand conversions of previously acquired locations.
27


Depreciation and Amortization
Depreciation and amortization expense increased $5 million, or 13%, due to additional fixed assets and finite-lived intangible assets recognized in conjunction with recent acquisitions and higher capital expenditures, primarily related to oil change and car wash site development, as well as full year depreciation for store openings that occurred in the prior 12 months.
Asset Impairment Charges and Lease Terminations
Asset impairment charges and lease terminations increased by $19 million. During the three months ended March 30, 2024, the Company recorded impairment charges primarily related to assets held for sale. For more information, refer to Note 6 in our consolidated financial statements included within this Form 10-Q.
Interest Expense, Net
Three Months Ended
(in thousands)
March 30, 2024% of Net RevenuesApril 1, 2023% of Net Revenues
Interest expense, net$43,772 7.6 %$38,141 6.8 %
Interest expense, net increased $6 million, or 15%, primarily due to increased borrowings and higher variable rates on the Revolving Credit Facility.
Loss (Gain) on Foreign Currency Transactions, Net
Three Months Ended
(in thousands)
March 30, 2024% of Net RevenuesApril 1, 2023% of Net Revenues
Loss (gain) on foreign currency transactions, net$4,321 0.8 %$(1,675)(0.3 %)
The loss on foreign currency transactions for the three months ended March 30, 2024 was primarily comprised of transaction losses in our foreign operations of $7 million, partially offset by a gain on foreign currency hedges of $3 million. The gain on foreign currency transactions for the three months ended April 1, 2023 was primarily comprised of a $2 million unrealized gain on foreign currency hedges that are not designated as hedging instruments.
Income Tax Expense
Three Months Ended
(in thousands)
March 30, 2024% of Net RevenuesApril 1, 2023% of Net Revenues
Income tax expense$6,164 1.1 %$10,971 2.0 %
Income tax expense was $6 million for the three months ended March 30, 2024 compared to $11 million for the three months ended April 1, 2023. The effective income tax rate for the three months ended March 30, 2024 was 59.1% compared to 26.9% for the three months ended April 1, 2023. The effective tax rate for the three months ended March 30, 2024 was primarily driven by the asset impairment charges and the non-deductible equity-based compensation expense. The effective tax rate for three months ended April 1, 2023 was driven by the inclusion of foreign disregarded entity losses.
28



Segment Results of Operations for the Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023
We assess the performance of our segments based on Segment Adjusted EBITDA, which is defined as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, store opening and closure costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges. Shared services costs are not allocated to these segments and are included in Corporate and Other. Segment Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.
Maintenance
Three Months Ended20242023
(in thousands, unless otherwise noted)
March 30, 2024April 1, 2023% Net Revenue For Segment% Net Revenue For Segment
Franchise royalties and fees$14,454 $12,443 5.5 %5.5 %
Company-operated store sales220,871 195,260 84.4 %85.7 %
Supply and other revenue26,388 19,965 10.1 %8.8 %
     Total net revenue$261,713 $227,668 100.0 %100.0 %
Segment Adjusted EBITDA
$91,436 $72,233 34.9 %31.7 %
System-Wide Sales
Change
Franchised stores$278,861 $246,683 $32,178 13.0 %
Company-operated stores$220,871 195,260 25,611 13.1 %
     Total System-Wide Sales$499,732 $441,943 $57,789 13.1 %
Store Count (in whole numbers)
Change
Franchised stores1,153 1,067 86 8.1 %
Company-operated stores661 599 62 10.4 %
     Total Store Count1,814 1,666 148 8.9 %
Same Store Sales %4.8 %12.6 %
Maintenance net revenue increased $34 million, or 15%, driven primarily by a $26 million increase in company-operated store sales from same store sales growth and 62 net new company-operated stores. Supply and other revenue increased by $6 million, or 32%, primarily due to higher system-wide sales. Franchise royalties and fees increased by $2 million, or 16%, primarily due to a $32 million, or 13%, increase in franchised system-wide sales from same store sales growth and 86 net new franchise stores.
Maintenance Segment Adjusted EBITDA increased $19 million, or 27%, primarily due to revenue growth, cost management, and operational leverage utilizing our efficient labor model at company-operated locations.

29


Car Wash
Three Months Ended20242023
(in thousands, unless otherwise noted)
March 30, 2024April 1, 2023% Net Revenue For Segment% Net Revenue For Segment
Company-operated store sales90,227 102,446 62.3 %65.3 %
Independently-operated store sales